Month: October 2023

(C) Reuters. FILE PHOTO: Second-hand Toyota cars are seen on sale at a dealer shop in Moscow, Russia, July 8, 2016. REUTERS/Sergei Karpukhin/File Photo

By Daniel Leussink

TOKYO (Reuters) – Japan’s move to bar most used-car sales to Russia slammed the brakes on a trade nearing $2 billion annually that had boomed in the shadow of sanctions over Ukraine elsewhere, according to trade data and market participants.

In early August, Japan’s government banned exports of all but subcompact cars to Russia, cutting off a lucrative backchannel in trade in used Toyotas, Hondas and Nissans for a network of brokers and smaller ports, especially Fushiki, an export hub on the Sea of Japan.

While wiping out Russia’s biggest source of used cars, the sanctions have driven down prices for second-hand cars in Japan and left brokers scrambling to send vehicles to other regions, especially right-hand drive markets in New Zealand, Southeast Asia and Africa.

Russia’s demand for second-hand cars from Japan jumped sharply after global automakers, including Toyota (NYSE:TM), pulled back from operations following Moscow’s invasion of Ukraine.

By last year, with sanctions elsewhere tightening, Russia was buying more than a quarter of Japan’s used-car exports for an average price of almost $8,200. That was more than double the price in 2020, when Russia took about 15% of Japan’s used-car exports.

Those sales had been on track to top $1.9 billion for all of 2023 before Japan imposed its own tougher sanctions, trade data show.

More than half of the 303,000 used cars imported by Russia in the first eight months of the year came from Japan, according to figures from Russian analytical agency Autostat.

That compared to sales of 606,950 new cars of mainly Russian and Chinese brands over the same period, Autostat data showed.

Toyama-based SV Alliance, a two-year-old car export business, had been part of the wartime boom that sent an average of some 6,500 used-cars to Russia every month through July from Japan’s Fushiki. The port is about 800 km (500 miles) from Russia’s Vladivostok, within two day’s sailing for a cargo ship.

“Business is down about 70% and we’ve had to let a couple of people go because there isn’t enough work,” said Olesya Alekseeva, a logistics coordinator at SV Alliance.

CHEAPER CARS FOR RECYCLERS

Japan has been a leading used-car exporter for decades. A system of mandatory inspections pushes the cost of maintaining used cars higher for customers in Japan. Financing costs for new car purchases, by contrast, are low.

The result: an export industry that has sent hundreds of thousands of cars on the road from Malaysia to Mongolia and Pakistan to Tanzania that were first purchased in Japan.

Takanori Kikuchi, a director for automotive trade policy at Japan’s Ministry of Economy, Trade and Industry, said the government was “watching to see what kind of an impact” the new sanctions would have.

Japan had originally banned exporting luxury vehicles to Russia in April last year. It added a prohibition on the export of heavy trucks in June.

Under the new sanctions, dealers are still allowed to export smaller cars, such as the Toyota Yaris or the Honda (NYSE:HMC) Fit, to Russia.

Element Trading, a used-car dealer in Niigata prefecture that borders Toyama, has seen the share of Russia in its business slide from a peak of above 50% to below 20%, chief executive Wataru Nishiwaki said.

The number of used cars on offer surged more than 20% in August from a year earlier, while average vehicle selling prices posted a 7% drop, preliminary data from auto auction house USS showed.

The price decline was welcomed by some. Battery recycling firm 4R Energy has seen a “significant” tailwind from declining used-car prices, including the Nissan (OTC:NSANY) Leaf, said chief executive Yutaka Horie.

Lower prices give the joint venture between Nissan and trading house Sumitomo wider opportunity to secure supplies, he said.

($1 = 149.3000 yen)

(C) Reuters. FILE PHOTO: Nissan Motor Co., Ltd’s Universal Powertrain Mounting System with a two-layer pallet structure, compatible with EV, e-POWER (HV) and gasoline vehicles is pictured in Kawachi-gun, in Tochigi prefecture, Japan October 8, 2021. REUTERS/Maki Shira

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) -Japan’s business sentiment improved in the third quarter, a central bank survey showed, suggesting conditions for a durable economic revival are falling into place even as a global slowdown keeps policymakers cautious about the outlook.

Big non-manufacturers’ mood brightened to levels unseen since 1991, when Japan was experiencing an asset-inflation bubble, a sign retailers were benefitting from a rebound in consumption after the dismantling of pandemic curbs.

Companies also retained their robust spending plans and faced a tight labour market, the survey showed, suggesting that conditions for the Bank of Japan to phase out its massive stimulus could fall into place.

The headline big manufacturers’ confidence index rose to 9 in September from 5 in June, the BOJ’s closely-watched “tankan” survey showed, exceeding market forecasts for a reading of 6 and marking the second straight quarter of improvement.

Big non-manufacturers’ index stood at 27, up from 23, the survey showed, above a median market forecast of 24 and improving for the sixth straight quarter. It was highest reading since November 1991.

“The stronger-than-expected improvement in the latest tankan survey suggests that the economy will continue to expand at an above-trend pace, which is contributing to mounting staff shortages and persistent price pressures,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

Many big companies said they were able to pass on higher costs to consumers, leading to the improvement in the business mood, a BOJ official told a briefing.

A rebound in auto output and falling raw material costs also helped lift sentiment, though some smaller firms said they were struggling to hike prices, the official said.

Big firms expect to increase capital expenditure by 13.6% in the current fiscal year ending in March 2024, matching market estimates, after a 11.7% rise in fiscal 2022, the tankan showed.

In a sign that wages could keep rising, an index gauging firms’ views on labour market was the tightest since 2019 for big manufacturers, and since 1992 for non-manufacturers.

The survey showed big manufacturers expect conditions to improve three months ahead, though sluggish global demand and signs of weakness in China’s economy cloud the outlook.

“The tankan showed Japan is on track for a domestic-demand led growth. But the overseas outlook is a source of concern, such as whether the U.S. economy can achieve a soft landing” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

The tankan is likely to be closely scrutinised by BOJ policymakers in determining whether economic conditions are falling into place to start raising interest rates.

On the inflation outlook, companies expect prices to rise 2.5% a year ahead, 2.2% three years from now and 2.1% five years ahead, roughly unchanged from their projections three months ago, the tankan showed.

Japan’s economy expanded an annualised 4.8% in April-June as robust exports offset weaknesses in consumption. But analysts expect a mild contraction in the July-September quarter as sluggish global demand weigh on exports.

Corporate earnings and business sentiment will be key to whether wages will keep rising next year in tandem with higher inflation, and lay the groundwork for the BOJ to phase out its massive monetary stimulus.

(C) Reuters. FILE PHOTO: Japanese yen and U.S. dollar banknotes are seen with a currency exchange rate graph in this illustration picture taken June 16, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Rae Wee

SINGAPORE (Reuters) – The dollar kicked off the last quarter of the year on the front foot on Monday as the prospect of higher-for-longer U.S. rates provided solid support, pushing the yen to an 11-month low.

Currency moves were subdued in early Asia trade with parts of Australia out for a holiday and China away for its Golden Week, though analysts said a narrowly-averted U.S. government shutdown could bring some relief to markets.

The yen slid to a roughly 11-month low of 149.74 per dollar, as the Japanese currency continued its slow-but-steady decline toward the 150 mark, a level which some see as a line in the sand that would spur Japanese authorities to intervene in the currency market as they did last year.

“Fear of intervention by the BOJ above the 146 level has come and gone and the currency is now above 148 to the dollar and the BOJ remains absent from currency markets,” said Olivier d’Assier, Axioma’s head of applied research for APAC.

A summary of opinions at the BOJ’s September meeting out on Monday showed policymakers discussed various factors that must be taken into account when exiting ultra-loose policy.

“They’re wary of tightening too early and squashing… a rise in inflation and growth,” said Jarrod Kerr, chief economist at Kiwibank. “They deserve to be cautious, though.”

In the broader currency market, the euro lost 0.07% to $1.0565, after ending the previous quarter with a 3% fall, its worst performance in a year.

Sterling was last 0.13% lower at $1.2188, having similarly slid nearly 4% against the dollar in the third quarter.

The U.S. dollar index, however, stood not too far from its recent 10-month high and was last at 106.24, after clocking its best quarterly performance in a year last month thanks to persistently hawkish Federal Reserve rhetoric.

“I’d rather be in dollars at the moment than euros or pounds or others,” said Kiwibank’s Kerr. “I think the dollar will find a bit more support.”

The U.S. Congress late on Saturday passed a stopgap funding bill with overwhelming Democratic support in a bid to avoid the federal government’s fourth partial shutdown in a decade, a move which Pepperstone’s head of research Chris Weston said “should be welcomed by risky assets”.

“We also now have a firm understanding that the U.S. Labor Department will release nonfarm payrolls data this Friday, as well as the U.S. CPI report on 12 October, which may have not been the case had the (government) shut down,” he said.

“This puts the 1 November FOMC meeting back on the table as a potential venue for a further 25-basis-point rate hike.”

Elsewhere, the Australian dollar fell 0.07% to $0.64305, while the kiwi edged 0.1% lower to $0.59925.

(C) Reuters. A passerby is reflected on an electric monitor displaying the graph of recent moments of the Japanese yen exchange rate against the U.S. dollar outside a brokerage in Tokyo, Japan May 2, 2023. REUTERS/Issei Kato/File photo

By Kevin Buckland

TOKYO (Reuters) – Asia’s stock markets made a tentative start to the fourth quarter in holiday-thinned trade on Monday, nudging sideways while the dollar held firm and a last-minute deal to avert a U.S. government shutdown lifted S&P 500 futures.

Markets in India, Hong Kong and China were closed for a holiday.

Japan’s Nikkei jumped as much as 1.7%, before retreating to flat in the mid-afternoon. The yen fell to within a whisker of 150-per-dollar and its weakness is a boon for exporters’ and the pricing of their foreign earnings in yen.

An eleventh-hour deal to avoid a U.S. government shutdown, struck over the weekend, also helped the mood and lifted U.S. stock futures by 0.5% in Asia. The weekend’s stopgap funding bill allowed the government to keep operating through Nov. 17, and means key data releases including Friday’s monthly payrolls report can go ahead on time.

European futures rose 0.2%.

“The shutdown risks are only delayed, not eliminated,” TD Securities strategists wrote in a client note.

“A sense of reduced uncertainty is likely to drive a small relief in markets,” but “market volatility is likely to remain elevated as investors wait for the next catalyst, which is likely to be top-tier data.”

Japanese stocks were also boosted by the Bank of Japan’s quarterly Tankan survey, which showed an improvement in business sentiment. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat.

DOLLAR RESILIENCE

Bond and foreign exchange trade remain driven by an anticipation of U.S. interest rates staying high and selling in Japanese bonds on Monday drew a central bank response.

Benchmark 10-year Japanese government bond yields rose by a basis point to their highest for a decade at 0.775%. The Bank of Japan said it would buy bonds with 5-10 years to maturity on Wednesday, with the size of purchases to be announced then. Futures bounced on the news.

In the Treasury market 10-year yields rose 4 bps to 4.6124% and the two-year yield rose 3.7 bps to $5.0832%.

The dollar stood tall in currency markets, though was stopped short of last week’s milestone highs save for against the yen, where it hit its highest since last October at 149.74 yen.

“Relative U.S. growth resilience and (a) hawkish Fed are factors that continue to underpin support for the dollar, until U.S. data starts to show more material signs of softening,” said OCBC currency strategist Christopher Wong.

Mixed China factory surveys and an expectation of no changes to rates settings at central bank meetings in the coming days kept pressure on the Australian and New Zealand dollars. [AUD/]

The Aussie fell 0.5% to $0.6400 and the kiwi slipped 0.2% to $0.5986. The euro was a touch weaker at $1.0564.

Crude oil steadied after late-week falls

Brent December crude futures rose 16 cents, or 0.2%, to $92.36 a barrel. U.S. West Texas Intermediate crude futures gained 20 cents, or 0.1%, to $90.99 a barrel.